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> Either that, or freedom from money is not a monotonically increasing function of one's allotment Well said. Freedom from money is a combination of factors:

by jdp23 16y ago

> Either that, or freedom from money is not a monotonically increasing function of one's allotment Well said. Freedom from money is a combination of factors: how much you have and spend in the present, and how much you expect to make and spend in the future. As people get more money it's very easy to ramp up your lifestyle and expectations to put more pressure on the future (instead of less). On the other hand, I know people who by focusing on what's important to them and adjusting their lifestyle feel fairly free without having millions of dollars. So (once you get to a decent threashold of earning) a lot of it is attitude as well.

JonnieCache 16y ago
>freedom from money is not a monotonically increasing function of one's allotment This is linked IMO to the studies mentioned in this video, which find that motivation and drive at work are similarly not a monotonically increasing function of pay, but in fact there is an optimal pay rate beyond which drive begins to decrease. http://www.youtube.com/watch?v=u6XAPnuFjJc http://www.youtube.com/watch?v=u6XAPnuFjJc
- michaelochurch 16y ago
  Relevant: http://michaelochurch.wordpress.com/2010/11/22/pay-more-get-less/ http://michaelochurch.wordpress.com/2010/11/22/pay-more-get-... There are a lot reasons why executive overpay makes CEOs perform worse at their jobs. Foremost among them is that it enables them to make short-term plays that are risky or harmful to the company in the long run. A $500,000-per-year job is one that an executive desperately wants to keep. A $25 million-per-year job, with four years' pay as a golden parachute, is one that can safely be blown up after a couple years. (No CEO intentionally blows up, but many take stupid risks driven by ego and status-based avarice that they would be less inclined to take if paid modest salaries and thereby more attached to their jobs.) There are two reasons why executive overpay exists. The first is self-dealing by a small, socially closed elite. They do it because they can. The second is to motivate younger people who greatly overestimate their chances of ascending to such ranks: printing dreambucks, I call it. I would argue, were it not for the cultural corrosion the overpay causes, that executive pay is actually a very, very cheap mechanism for achieving the 2nd goal. Overpaying executives does motivate people to want to get to that rank. The problem is more subtle and cultural: what does it motivate them to do? Be more creative? No. Be more ethical? Certainly not. Be more ruthless? Sure, but "ruthless" is a hair's breadth away from psychopathic and workplace psychopaths (cf. Fiorina) can destroy companies.
  - JonnieCache 16y ago
    >Sure, but "ruthless" is a hair's breadth away from psychopathic The literal meanings are identical. "Ruth" is an archaic word for a feeling of pity, compassion or remorse.
  - yummyfajitas 16y ago
    Why do you believe corporate risktaking is harmful to the company in the long run? If anything, I always thought the common criticism of big corporations is that they are far too risk averse. E.g., rather than taking a risk and betting it all on Maemo (an early linux-based smartphone OS), Nokia instead went the safe route and have now stagnated. Similarly, when problems arise, many big companies layer small fix after small fix on an existing system - it's much safer than investing $250M in a complete renovation.
    - natnat 16y ago
      Risk-taking isn't one of those things that's universally bad or universally good. For entrepreneurs, who have little to lose and a lot to gain, most risk-taking is good. For established companies, which have a lot to lose and a lot to gain, it's much more of a balancing act. There are a lot of risks that have a moderately large upside and a huge potential downside, that tends to be delayed, that a lot of CEOs are given a lot of incentives to take. Mark Hurd with HP comes to mind: it's pretty risky to cut payrolls, gut R&D budgets, and focus mainly on really high-margin products like overpriced ink. The upside is a big bump in profits, but the downside risk is making your employees hate the company and getting killed when someone else starts selling slightly less overpriced ink. The downside tends to be delayed a bit, though, so CEOs who make $25m and get a golden parachute don't need to worry about it.
      - michaelochurch 16y ago
        Risk-taking isn't one of those things that's universally bad or universally good. Thank you. Degenerate risk-taking is bad enough, but criminal when other people will suffer most of the consequences. Good risks generally have limited downside. For example, R&D projects and startups that, if they fail commercially, only cost the money put into them, are good risks. Bad risks are generally those that have huge downside and low upside, that are taken because the consequences can be pushed off onto other people. An example of this would be eschewing a $500,000 safety device on an oil rig under a mile of ocean, thus admitting (realized, thanks to BP) risk of ecological catastrophe. Corporations are notorious for externalizing costs but where they really shine is in the externalization of low-frequency, high-impact risks that most people can't evaluate. They're great at that. I think that corporate executives often find themselves in a place where boredom gets the better of them. In dysfunctional companies, a well-studied executive can add value. The reward for this is moving on to a better job at a better company. Eventually, the executive ends up as the CEO of a great company like HP before some awful CEOs did it in. Problem: the company is running well and doesn't really need a CEO. People are already doing great work without direction. Result: CEO gets bored. I know a day trader who increased his profits by refusing to work between 10:30 and 3:00. He could find good trades in the first and last hour of the day, but "boredom trading" in the bland middle injected noise and didn't make any money for him. Most big-company executives are bored traders: making capricious decisions that just add noise, just to feel useful and fill time.
michaelochurch 16y ago
The way the money is made, and whether something must be done to sustain it, has an impact. If you're an executive in a traditional corporation, you're end up having to keep an absurd lifestyle because you're a professional social climber and, the minute you retire from the shenanigans, your earned income drops dramatically. If you made your money in a lump-sum acquisition, or have a high salary because of talent and skills rather than social advantage (it's rare, but it does happen) you're in more of a position to enjoy your money. At the upper tier of wealth you have people who aren't social climbers per se but are really competitive. Next down, you have most of the social climbers trying to turn their money into status (which begets more money).
- jdp23 16y ago
  Actually I was an executive at a traditional corporation (a GM at Microsoft) and before that a founder/CTO at a venture-funded startup ... You're very right that there's a lot of competitive pressure (and social climbers) but we always avoided it.

by jdp23 16y ago

JonnieCache 16y ago

>freedom from money is not a monotonically increasing function of one's allotment This is linked IMO to the studies mentioned in this video, which find that motivation and drive at work are similarly not a monotonically increasing function of pay, but in fact there is an optimal pay rate beyond which drive begins to decrease. http://www.youtube.com/watch?v=u6XAPnuFjJc http://www.youtube.com/watch?v=u6XAPnuFjJc

michaelochurch 16y ago
Relevant: http://michaelochurch.wordpress.com/2010/11/22/pay-more-get-less/ http://michaelochurch.wordpress.com/2010/11/22/pay-more-get-... There are a lot reasons why executive overpay makes CEOs perform worse at their jobs. Foremost among them is that it enables them to make short-term plays that are risky or harmful to the company in the long run. A $500,000-per-year job is one that an executive desperately wants to keep. A $25 million-per-year job, with four years' pay as a golden parachute, is one that can safely be blown up after a couple years. (No CEO intentionally blows up, but many take stupid risks driven by ego and status-based avarice that they would be less inclined to take if paid modest salaries and thereby more attached to their jobs.) There are two reasons why executive overpay exists. The first is self-dealing by a small, socially closed elite. They do it because they can. The second is to motivate younger people who greatly overestimate their chances of ascending to such ranks: printing dreambucks, I call it. I would argue, were it not for the cultural corrosion the overpay causes, that executive pay is actually a very, very cheap mechanism for achieving the 2nd goal. Overpaying executives does motivate people to want to get to that rank. The problem is more subtle and cultural: what does it motivate them to do? Be more creative? No. Be more ethical? Certainly not. Be more ruthless? Sure, but "ruthless" is a hair's breadth away from psychopathic and workplace psychopaths (cf. Fiorina) can destroy companies.
- JonnieCache 16y ago
  >Sure, but "ruthless" is a hair's breadth away from psychopathic The literal meanings are identical. "Ruth" is an archaic word for a feeling of pity, compassion or remorse.
- yummyfajitas 16y ago
  Why do you believe corporate risktaking is harmful to the company in the long run? If anything, I always thought the common criticism of big corporations is that they are far too risk averse. E.g., rather than taking a risk and betting it all on Maemo (an early linux-based smartphone OS), Nokia instead went the safe route and have now stagnated. Similarly, when problems arise, many big companies layer small fix after small fix on an existing system - it's much safer than investing $250M in a complete renovation.
  - natnat 16y ago
    Risk-taking isn't one of those things that's universally bad or universally good. For entrepreneurs, who have little to lose and a lot to gain, most risk-taking is good. For established companies, which have a lot to lose and a lot to gain, it's much more of a balancing act. There are a lot of risks that have a moderately large upside and a huge potential downside, that tends to be delayed, that a lot of CEOs are given a lot of incentives to take. Mark Hurd with HP comes to mind: it's pretty risky to cut payrolls, gut R&D budgets, and focus mainly on really high-margin products like overpriced ink. The upside is a big bump in profits, but the downside risk is making your employees hate the company and getting killed when someone else starts selling slightly less overpriced ink. The downside tends to be delayed a bit, though, so CEOs who make $25m and get a golden parachute don't need to worry about it.
    - michaelochurch 16y ago
      Risk-taking isn't one of those things that's universally bad or universally good. Thank you. Degenerate risk-taking is bad enough, but criminal when other people will suffer most of the consequences. Good risks generally have limited downside. For example, R&D projects and startups that, if they fail commercially, only cost the money put into them, are good risks. Bad risks are generally those that have huge downside and low upside, that are taken because the consequences can be pushed off onto other people. An example of this would be eschewing a $500,000 safety device on an oil rig under a mile of ocean, thus admitting (realized, thanks to BP) risk of ecological catastrophe. Corporations are notorious for externalizing costs but where they really shine is in the externalization of low-frequency, high-impact risks that most people can't evaluate. They're great at that. I think that corporate executives often find themselves in a place where boredom gets the better of them. In dysfunctional companies, a well-studied executive can add value. The reward for this is moving on to a better job at a better company. Eventually, the executive ends up as the CEO of a great company like HP before some awful CEOs did it in. Problem: the company is running well and doesn't really need a CEO. People are already doing great work without direction. Result: CEO gets bored. I know a day trader who increased his profits by refusing to work between 10:30 and 3:00. He could find good trades in the first and last hour of the day, but "boredom trading" in the bland middle injected noise and didn't make any money for him. Most big-company executives are bored traders: making capricious decisions that just add noise, just to feel useful and fill time.

michaelochurch 16y ago

The way the money is made, and whether something must be done to sustain it, has an impact. If you're an executive in a traditional corporation, you're end up having to keep an absurd lifestyle because you're a professional social climber and, the minute you retire from the shenanigans, your earned income drops dramatically. If you made your money in a lump-sum acquisition, or have a high salary because of talent and skills rather than social advantage (it's rare, but it does happen) you're in more of a position to enjoy your money. At the upper tier of wealth you have people who aren't social climbers per se but are really competitive. Next down, you have most of the social climbers trying to turn their money into status (which begets more money).

jdp23 16y ago
Actually I was an executive at a traditional corporation (a GM at Microsoft) and before that a founder/CTO at a venture-funded startup ... You're very right that there's a lot of competitive pressure (and social climbers) but we always avoided it.